Pending Hearing on Modification & Vacant Rental

[ProPerDoper]

What is the name of your state (only U.S. law)? California

Anticipating upcoming hearing on my motion for modification of child support, I learn that my ex's rental property is vacant. I've located her rental ad on Craig's List by a lucky search, but I anticipate it to be vacant at time of hearing end of February. (She may even attempt to conceal any rent given the fact that she transferred the property into her parents trust)

Any suggestions on how to address the income that may not be present at time of hearing, but will certainly be shortly thereafter...I suspect.

I'd prefer to build something into the order that would anticipate rent, say within a few months rather than to return for a review of income.

Any suggestions?What is the name of your state (only U.S. law)?

 

[nextwife]

If the property is IN HER PARENT'S TRUST, it is not owned by her.

You'd need to prove it was transferred to avoid CS, and not acquired by the trust by purchase or as reimbursement for some previous debt she may have owed the trust. Until you do that, what her parents trust earns from the property is irrelevent.

 

[ProPerDoper]

If the property is IN HER PARENT'S TRUST, it is not owned by her.

You'd need to prove it was transferred to avoid CS, and not acquired by the trust by purchase or as reimbursement for some previous debt she may have owed the trust. Until you do that, what her parents trust earns from the property is irrelevent.

Fortunately, I have that proof from a deposition of her which I attended + obtained the transcript. (Long story)

My real objective however, is to deal with the expected rental income once her property is rented.

Say the hearing is on Feb 24, yet she doesn't rent the property until April 1. How can one argue that rent should be included based on expected occupancy prospectively, without having to review to court for a review?

 

[LdiJ]

Fortunately, I have that proof from a deposition of her which I attended + obtained the transcript. (Long story)

My real objective however, is to deal with the expected rental income once her property is rented.

Say the hearing is on Feb 24, yet she doesn't rent the property until April 1. How can one argue that rent should be included based on expected occupancy prospectively, without having to review to court for a review?

I am going to be really honest with you. The only rental income that can be counted in a child support calculation is net rental income, in other words, the profit. That means income after expenses and those expenses include mortgage interest, property taxes, repairs, utilities while the home is empty, advertising costs and depreciation etc.

People rarely make much, if any profit at all on a rental property, unless there is no mortgage and its rented for the full year.

Its very unlikely that your ex has enough net rental income from the property to have any signficant effect on a child support calculation.

So, unless she owns it free and clear, its quite possible that it could have a net loss, rather than profit, and therefore drive her total income down, rather than up.

 

[ProPerDoper]

I am going to be really honest with you. The only rental income that can be counted in a child support calculation is net rental income, in other words, the profit. That means income after expenses and those expenses include mortgage interest, property taxes, repairs, utilities while the home is empty, advertising costs and depreciation etc.

People rarely make much, if any profit at all on a rental property, unless there is no mortgage and its rented for the full year.

Its very unlikely that your ex has enough net rental income from the property to have any signficant effect on a child support calculation.

So, unless she owns it free and clear, its quite possible that it could have a net loss, rather than profit, and therefore drive her total income down, rather than up.

I appreciate the straight answers.... thanks!

I understand, as I also have a rental that nets a loss at the end of the year. You've hit the nail on the head in that she does own the property free and clear, with the exception of an equity line on the property with a balance of ~ $35k according to her last I&E. A conservative estimate puts her net income at ~ $650/mo, which does make a difference of $117/mo on the DissoMaster calculations for guideline support in our matter. (Due to me as primary custodial parent)

In another thread sometime back I asked whether or not the court would consider a net loss for rental property towards support calculations, which would have the effect of reducing support. I seem to recall that many felt the court wouldn't actually allow a reduction in support due to a rental loss, as it would be difficult to make that ruling in the best interest of the kids.

Did I misunderstand? Will the court consider a loss for rental property when input into the DissoMaster?

 

[LdiJ]

I appreciate the straight answers.... thanks!

I understand, as I also have a rental that nets a loss at the end of the year. You've hit the nail on the head in that she does own the property free and clear, with the exception of an equity line on the property with a balance of ~ $35k according to her last I&E. A conservative estimate puts her net income at ~ $650/mo, which does make a difference of $117/mo on the DissoMaster calculations for guideline support in our matter. (Due to me as primary custodial parent)

If she has an equity line on the property she does NOT own it free and clear. Are you including depreciation in that calculation? Also, you have to keep in mind that profit is calculated on a yearly basis and takes into consideration months the property is vacant. If she nets 650.00 a month for six months of the year, but its vacant the rest, its not a 650.00 a month profit.

In another thread sometime back I asked whether or not the court would consider a net loss for rental property towards support calculations, which would have the effect of reducing support. I seem to recall that many felt the court wouldn't actually allow a reduction in support due to a rental loss, as it would be difficult to make that ruling in the best interest of the kids.

Did I misunderstand? Will the court consider a loss for rental property when input into the DissoMaster?

That question is a bit difficult to answer. If depreciation is what tips it over into a loss, a judge might not consider the loss because depreciation is a non cash expense. However if its cash expenses that tips it over into a loss, it would highly surprise me if that loss weren't taken into consideration in the calculation.

 

[Astrolink]

Isn't depreciation added back in for child support calculations?

 

[CJane]

Fortunately, I have that proof from a deposition of her which I attended + obtained the transcript. (Long story)

She admitted, under oath, that she transferred ownership to the trust in order to avoid child support AND that her parent's trust is going to funnel the rental money to her?

Say the hearing is on Feb 24, yet she doesn't rent the property until April 1. How can one argue that rent should be included based on expected occupancy prospectively, without having to review to court for a review?

Unless you can prove that the property has been consistently rented for $X for the past 2 years or so, you're going to have a really hard time doing this. You can't guarantee that the place will rent, or that it will rent for what YOU think it will, or what it rented for last time.

 

[ProPerDoper]

Isn't depreciation added back in for child support calculations?

That's my understanding also, at the judge's discretion. There is in fact an entry field in the DissoMaster for exactly this purpose.

 

[ProPerDoper]

She admitted, under oath, that she transferred ownership to the trust in order to avoid child support AND that her parent's trust is going to funnel the rental money to her?

No...of course not. However the transcript does in fact document her testimony that she transferred her property in violation of the ATRO's during the dissolution process. The Judgment outlines her attempts to evade both support and creditors, (especially me) as well as the authority of the court. Like I said...long story.

Unless you can prove that the property has been consistently rented for $X for the past 2 years or so, you're going to have a really hard time doing this. You can't guarantee that the place will rent, or that it will rent for what YOU think it will, or what it rented for last time.

Understood, and point well taken. However, I've found that of the 5 judicial officers we've been before during this 9-year process, each and every one of them is very open to the concept of insuring that all income received and/or potentially earned is considered for support purposes. Additionally, a recent California Appellate decision opines that profits or income received from investments be maintained for the purpose of providing support. (IRMO Pearlstein)

A good argument can be made on both sides. However, I feel confident that a judge tasked to decide on support for two minor children would give consideration to the argument that when the property is rented, that income should be considered for support purposes.

Consider that in the past, a percentage was added to any bonus income I might receive, regardless of any immediate expectations for that bonus income. If I received any, I was ordered to pay roughly 9% of that income to my ex as support. That same request will likely be made in court once again, and I will argue that order should apply to both parties for additional income received as bonus, and/or rental income. In the alternative, we can return to court for a review at a predetermined time.

The asking amount for her rental is documented within her add for rent. The expenses are known for the last period of time it's been rented. (9 months?) The rental market is strong here due to the foreclosure crisis, and I know that she will want it rented ASAP for financial gain as she's now facing her 3rd appeal from her 5th Family Law attorney who filed for breach of warranty against her in 2003 following her refusal to pay him the final $78k owed. (She's now spent in excess of $130k to battle a $78k fee balance)

Granted....I'm not objective here. The support I pursue is for our kids. However, I've been before the court in excess of 20 times over the past 9 years answering to her requests for support even though I have primary custody, as up until recently my income was sufficient enough that the order was for me to pay her. What I have learned from all of this is that the court typically wants support paid on any income earned. My objective is to have the prospective income from her rental considered also.